Far Eastern University

Manila City

Intermediate Accounting 3 December _, 2020

FINAL EXAMINATION Ms. Bernadette L. Baul

1) Big Bro Company borrows money under various loan agreement involving notes discounted and notes requiring interest
payments at maturity. During the current year ended December 31, Big Bro paid interest totaling P5,000,000. The balance
sheets included the following:
December 31 January 1
Interest payable 2,500,000 2,000,000
Prepaid interest 1,500,000 500,000

How much interest expense should Big Bro report for the current year?
Answer:

Use the following information for the next five (5) questions:
An analysis of incomplete records of Dayao Corporation produced the following information applicable to 2019:
Accounts Increases Accounts Decreases
Cash 4,200,000 Inventory 1,000,000
Accounts receivable 1,400,000 Equipment 100,000
Accounts payable 400,000 Notes receivable 600,000
Prepaid insurance 200,000 Accrued salaries payable 300,000

Summary of cash transactions were as follows:

Receipts:
Cash sales 3,000,000
Collections of accounts receivable 30,000,000
Collections on notes receivable 2,400,000
Interest on notes receivable 200,000
Purchase returns and allowances 500,000

Disbursements:
Cash purchases 1,000,000
Payments on accounts payable 16,500,000
Sales returns and allowances 400,000
Insurance 700,000
Salaries 10,000,000
Equipment 800,000
Other expenses 1,500,000
Dividends 1,000,000

Additional information:
• Total purchase returns and allowances amounted to P800,000
• Total sales returns and allowances amounted to P1,200,000.

2) What is the accrual basis Net sales?

Answer:

3) What is the accrual basis Net purchases?

Answer:

4) What is the accrual cost of sales?

Answer:

5) What is the depreciation expense?

Answer:

6) What is the net income under accrual basis of accounting?

Answer:
Use the following information for the next four (4) questions:
Cagindangan Company presented to you the following income statement.
Cagindangan Company
Income Statement
For the Year Ended December 31, 2020
Sales 10,350,000
Cost of Goods Sold 7,050,000
Gross profit 3,300,000
Operating expenses:
Selling 675,000
Administrative 1,050,000 1,725,000
Net income 1,575,000

Additional information:
• Accounts receivable decreased P540,000 during the year.
• Prepaid expenses increased P255,000 during the year.
• Accounts payable to suppliers of merchandise decreased P412,500 during the year.
• Accrued expenses payable decreased P150,000 during the year.
• Administrative expenses include depreciation expense of P90,000.
• Inventories decreased by P450,000.

7) What is the total amount of cash paid for operating expenses during the year?
Answer:

8) What is the net amount of cash provided by operating activities?

Answer:

9) The following information relates to Jallorina Corporation for the year ended June 30, 2022.
Sales revenue 450,000
Opening balance of trade receivables (net of allowance) 100,000
Closing balance of trade receivable (net of allowance) 132,500
Doubtful debt expense 5,000
Increase in allowance for doubtful debts 2,000

Bad debts are written off against the allowance for doubtful debts. What is the amount of cash collected from the
customers during the year ended June 30, 2022?
Answer:

10) Alexis Company prepares its statement of cash flows using the direct method for operating activities. For the year ended
December 31, 2020, Alexis Company reports the following activity:

Sales on account 1,300,000

Cash sales 740,000
Decrease in accounts receivable 610,000
Increase in accounts payable 72,000
Increase in inventory 48,000
Cost of goods sold 975,000

What is the amount of cash payments to suppliers reported by Alexis Company for the year ended December 31, 2020?
Answer:

Use the following information for the next four (4) questions:
One Man Company provided the following information on selected transactions during 2022:
Purchase of land by issuing bonds 250,000
Proceeds from issuing bonds 500,000
Purchases of inventory 950,000
Purchases of treasury shares 150,000
Loans made to affiliated corporations 350,000
Dividends paid to preference shareholders 100,000
Proceeds from issuing preference share 400,000
Proceeds from sale of equipment 50,000

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11) The net cash provided (used) by investing activities during 2022 is
Answer:

12) The net cash provided by financing activities during 2022 is

Answer:

13) Net cash flows from operating activities for 2022 for Bajue Corporation was P300,000. The following items are reported
on the financial statements for 2022:
Cash dividends paid on ordinary shares 20,000
Depreciation amortization 12,000
Increase in accounts receivable 24,000

Based on the information above, Bajie’s net income for 2022 was
Answer:

14) The following information on selected cash transactions for 2022 has been provided by Temperance Company:
Proceeds from sale of land 160,000
Proceeds from long-term borrowings 400,000
Purchases of plant assets 144,000
Purchases of inventories 680,000
Proceeds from sale of Temperance ordinary share 240,000

What is the cash provided (used) by investing activities for the year ended December 31, 2022, as a result of the above
information?
Answer:

15) Selected information from Prison Break Company’s 2022 accounting records is as follows:
Proceeds from issuance of ordinary shares 400,000
Proceeds from issuance of bonds 1,200,000
Cash dividends on ordinary shares paid 160,000
Cash dividends on preference shares paid 60,000
Purchase of treasury shares 120,000
Sale of ordinary shares to officers and employees not included above 100,000

Prison Break’s statement of cash flows for the year ended December 31, 2022, would show net cash provided (used) by
financing activities of (include negative sign if used)
Answer:

16) Pyromancer Inc. manufactures steel. What will be the net cash flow from operating activities based on the following
information? (include negative sign if outflow)
Issue of shares 500,000
Repayment of debentures 300,000
Sale of goods on credit 1,200,000
Sale of goods on cash 300,000
Cash purchases 800,000
Additional term loan 200,000
Purchase of additional plant 600,000
Bad debts written off 20,000
Receivable – January 1 500,000
Receivables – December 31 600,000

Answer:

17) Thunderbringer Company provided the following selected information:

Accounts receivable – January 1, net of allowance of P100,000 1,200,000
Accounts receivable – December 31, net of allowance of P300,000 1,600,000
Sales of the year 8,000,000
Bad debt expense for the year 250,000
Cash expenses for the year 5,250,000

What is the net cash flow from operating activities?

Answer:

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18) Hag Company reported the following account balances at December 31, 2023:
Accounts receivable (net) 550,000
Trading securities 1,200,000
Accumulated depreciation on equipment and furniture 350,000
Cash 200,000
Inventory 600,000
Equipment and furniture 2,500,000
Patent 120,000
Deferred charges 40,000
Land held for future business site 800,000

What amount should be reported as total current asset?

Answer:

Use the following information for the next two (2) questions:
Foxhound Company provided the following balances on December 31, 2021:
Cash and cash equivalent 1,000,000
Trade and other receivable 950,000
Inventory 500,000
Financial assets at fair value through P&L 500,000
Financial assets at fair value through OCI 800,000
Property, Plant and Equipment 1,500,000

Further analysis of Foxhound Company’s accounts revealed the following:

• Trade and other receivable included the following:
§ Advances to an executive officer for P250,000 which is due on March 1, 2023.
§ Customer credit balance of P60,000 which deducted in relation to goods returned in 2021.
§ Equity over the assigned accounts of P120,000; the assigned accounts amounted to P200,000 while the related
note balance was P80,000.
• Property, Plant and Equipment includes a plot of land in which Foxhound Company has committed to a plan to sell it and
currently active in locating a buyer to complete the plan. The carrying value of the land included in the account was
P675,000 while its fair value less cost to sell is P600,000.

19) The amount reported as current asset on December 31, 2021 is

Answer:

20) The amount reported as noncurrent asset on December 31, 2021 is

Answer:

Use the following information for the next two (2) questions:
Alas Company provided the following balances on December 31, 2021:
Cash and cash equivalents 1,200,000
Inventory 650,000
Prepayments 120,000
Investment in associate 440,000
Deferred tax asset 200,000
Intangible assets 380,000

Further analysis of Alas Company’s accounts revealed the following:

• Cash account includes a sinking fund of P300,000, as well as P90,000 being held to pay VAT. The balance was net of
an overdraft amounting to P200,000 in its BPI account. Alas does not have any other account in BPI.
• Prepayments included a P50,000 security deposit which will expire by December 31, 2023.
• The deferred tax asset was due to a future deductible amount of which 40% will reverse in 2022 and the remaining portion
evenly from 2023 to 2025.

21) The amount reported as current assets on December 31, 2021 is

Answer:

22) The amount reported as noncurrent asset on December 31, 2021 is

Answer:

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23) Campbel Company’s records for the year ended December 31, 2022 included the following information:

Raw materials purchases 860,000

Work in progress inventory decrease 10,000
Finished goods inventory increase 70,000
Raw materials inventory decrease 30,000
Manufacturing overhead 600,000
Freight-out 90,000
Direct labor 400,000
Campbel Company’s cost of sales for the year 2022 is
Answer:

24) Blass Company provided the following information for the current year:

Unrealized loss on FVTOCI investments 500,000

Translation reserve – credit 600,000
Revaluation reserve 2,000,000
Accumulated profits adjustment – debit 100,000
Appropriated reserve 200,000
Gain on sale of treasury shares 150,000
Net income 6,000,000
What amount of comprehensive income should be reported for the current year?
Answer:

25) The following information for 2022 is provided by Kaya Mo Yan Company:
Sales 20,000,000
Cost of goods sold 12,000,000
Selling expenses 1,200,000
General and administrative expenses 1,800,000
Interest expense 1,500,000
Gain on early extinguishment of long-term debt 500,000
Correction of inventory error, net of income tax – credit 800,000
Investment income – equity method 600,000
Gain on sale of investment 2,000,000
Income tax expense 2,100,000
Dividends declared 2,500,000

What was the 2022 income from continuing operations?

Answer:

26) The following transactions for Brutavious Enterprises during the second quarter of 2022:
• Sales amounted to P5,000,000 and related cost of goods sold was P3,000,000
• Selling expenses for the given period was P250,000.
• Depreciation is usually recorded by Brutavious at annual amount of P1,200,000.
• Real property taxes for the year in the amount of P600,000 were paid on April 1, 2022.
• An inventory loss arising from a temporary market decline of P400,000 had occurred on June 30, 2022.

Ignoring income taxes, net income for the second quarter ending June 30, 2022 should be
Answer:

27) Arrow Company and its divisions are engaged solely in manufacturing operations. The following data pertains to the
industries in which operations were conducted for the year ended December 31, 2022.
Segments Total revenue Operating profit Identifiable assets
A 13,000,000 4,000,000 25,000,000
B 9,000,000 2,000,000 20,000,000
C 7,700,000 1,500,000 15,000,000
D 3,000,000 1,000,000 7,000,000
E 3,800,000 800,000 8,000,000
F 3,500,000 700,000 5,000,000
40,000,000 10,000,000 80,000,000

In its segment information for 2022, how many reportable operating segments does Arrow have?
Answer:

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Use the following information for the next three (3) questions:
On January 1, 2022, TLC Company classifies a hotel property a non-current asset held for sale. Immediately before the
classification as held for sale, the carrying amount of the property is P400,000,000 (cost of P500,000,000 and accumulated
depreciation of P100,000,000). The hotel is depreciated on the straight-line method with a useful life of 50 years. The estimate
of the fair value less cost to sell on this date is P350,000,000. On January 1, 2023 no buyer could be identified. On this date,
management concludes that the criteria for classification could not be met. The estimate of the fair value less cost to sell is
revised to P340,000,000 while the value in use at the time is estimated at P380,000,000.

28) What amount of impairment loss should TLC Company recognize at the date the asset was classified as held for sale?
Answer:
29) The amount taken to profit or loss on the date the asset was reclassified back to property, plant and equipment is
Answer:
30) The depreciation expense for 2023 after the asset was reclassified back to property, plant and equipment is
Answer:

Use the following information for the next two (2) questions:
Nobita Corporation has two business segments, Segment A and Segment B. Segment A’s business operation is continuing.
Segment B met the criteria to be classified as “held for sale”. The board of directors was able to dispose this segment (B) on
September 1, 2021. Net proceeds from the sale were P20,000,000; while the segments’ carrying amount on September 1,
2021 was P18,000,000. The following pertains to the results of the operations of Segment A & B during 2021:
Segment A Segment B
January 1 – December 31, 2021 January 1 – December 31, 2021
Revenue 25,000,000 2,000,000
Selling and general expenses 15,000,000 15,000,000
Income tax 35%
31) How much shall be presented as Discontinued operations on the face of the income statement?
Answer:
32) How much shall be presented as profit/loss on the face of the income statement?
Answer:

Use the following information for the next four (4) questions:
Jindo Company reported profits of P4,000,000 and P8,000,000 in 2021 and 2022, respectively. In 2023, the following prior
period errors were discovered:
• The inventory on December 31, 2021 was understated by P200,000.
• An equipment with an acquisition cost of P1,200,000 was erroneously charged as expense in 2021. The equipment has
an estimated useful life of 5 years with no residual value. Jindo Company provides full year depreciation in the year of
acquisition.

The unadjusted balances of retained earnings are P8,800,000 and P16,800,000 as of December 31, 2021 and 2022,
respectively.

33) How much is the correct profit in 2021?

Answer:

34) How much is the correct profit in 2022?

Answer:

35) How much is the correct retained earnings in 2021?

Answer:

36) How much is the correct retained earnings in 2022?

Answer:

37) Arachna Inc. has determined the following information related to operations for 2023:
Revenue from sales 7,000,000
Expenses 4,000,000
Income before income taxes 3,000,000

In reviewing the records, you discovered the following items:

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 • During 2023, the company discovered an error in depreciation in 2022. The correction of this error, which has not
been recorded, will result in an increase in depreciation for 2022 of P200,000.
• During 2023, the company sustained a loss of P400,000 because of flood, which destroyed its inventory. The
company charged retained earnings and credited inventory for P400,000.

How much is the correct profit before tax for the year 2023?
Answer:

Use the following information for the next three (3) questions:
Wildsoul Company showed pre-tax income of P2,500,000 for the year ended December 31, 2022. On your year-end
verification of the transactions of the Company, you discovered the following errors:
• P1,000,000 worth of merchandise was purchased in 2022 and included in the ending inventory. However, the purchase
was recorded only in 2023.
• A merchandise shipment valued at P1,500,000 was properly recorded as purchases at year-end. The merchandise was
inadvertently omitted from the physical count, since it has not arrived by December 31, 2022.
• Value added tax for the fourth quarter of 2022, amounting to P500,000, was included in the Sales account.
• Rental of P300,000 on an equipment, applicable for six months, was received on November 1, 2022. The entire amount
was reported as revenue upon receipt.
• Rent paid on building covering the period from July 1, 2022 to July 1, 2023, amounting to P1,200,000, was paid and
recorded as expense on July 1, 2022. The company did not make any adjustment at the end of the year.

38) The correct pre-tax profit for 2022 should

Answer:

39) What is the net effect of the foregoing errors on the total assets at December 31, 2022? (use negative sign if overstated)
Answer:

40) What is the total understatement of the total liabilities at December 31, 2022?
Answer:

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